Pricing Strategy Optimization Specialization

Start Date: 06/16/2019

Course Type: Specialization Course

Course Link: https://www.coursera.org/specializations/uva-darden-bcg-pricing-strategy

Explore 1600+ online courses from top universities. Join Coursera today to learn data science, programming, business strategy, and more.

About Course

In this Specialization, we show you techniques to increase price realization and maximize profits. Learn from Boston Consulting Group's global pricing experts and University of Virginia Darden School of Business faculty, who share the frameworks, tips and tools we use in our business and research environments. We will look at pricing through BCG's proprietary and time-tested three “lenses”—cost and economics, customer value, and competition—to build your understanding of the strategic power of pricing. You’ll leave the Specialization with a portfolio-building presentation that demonstrates your ability to price strategically.

Course Syllabus

Cost and Economics in Pricing Strategy
Customer Value in Pricing Strategy
Market and Competition in Pricing Strategy
Pricing Strategy in Practice

Deep Learning Specialization on Coursera

Course Introduction

Pricing Strategy Optimization Specialization-

Course Tag

Cost-Based Pricing Pricing Strategies Market-Based Pricing Customer Value-based Pricing Strategic Management

Related Wiki Topic

Article Example
Price optimization Price optimization utilizes analysis of big data to predict the behavior of potential buyers to different prices. Companies use price optimization models to determine pricing structures for initial pricing, promotional pricing and discount pricing.
Pricing Marketers develop an overall pricing strategy that is consistent with the organisation's mission and values. This pricing strategy typically becomes part of the company's overall long -term strategic plan. The strategy is designed to provide broad guidance to price-setters and ensures that the pricing strategy is consistent with other elements of the marketing plan. While the actual price of goods or services may vary in response to different conditions, the broad approach to pricing (i.e., the pricing strategy) remains a constant for the planning outlook period which is typically 3–5 years, but in some industries may be a longer period of 7–10 years.
Price optimization "Pricing and Revenue Optimization" written by Dr. Robert L. Phillips discusses the economics behind pricing optimization, how it is used as a corporate process, its relationship to supply constraints and how it is perceived by the consumer. In the book, pricing optimization is recognized as an important application for quantitative analysis and there is increased interest in learning its techniques among different industries.
Pricing Broadly, there are six approaches to pricing strategy mentioned in the marketing literature:
Pricing science The methods employed in pricing science may be categorized into two broad areas: 1. forecasting and 2. optimization. The forecasting problem reflects the fact that the pricing decisions are intended to affect purchase events over some future time horizon. The optimization problem reflects the mathematical complexity required to reach feasible and practical pricing solutions.
Premium pricing The disadvantages of this pricing strategy includes:
Bayesian optimization Bayesian optimization is a sequential design strategy
Price optimization In 2009, the NAW Institute for Distribution Excellence and Texas A&M University’s Industrial Distribution Program conducted a research study titled "Pricing Optimization: Striking the Right Balance for Margin Advantage" which investigated price optimization and best practices in wholesale distribution. The study recommended wholesalers practice complexity management to provide structure and consistency with regards to pricing in order to improve margins.
Price optimization Manfred Krafft and Murali K. Mantrala discuss the use of price optimization software in the retail industry and the paradigm shift from price optimization to pricing process improvement in their book "Retailing in the 21st Century: Current and Future Trends". The book mentions that the research conducted on price optimization by its traditional definition is not applicable to the retail industry, thus they recommend retailers adopt a process view of pricing.
Pricing "Premium pricing" (also called prestige pricing) is the strategy of consistently pricing at, or near, the high end of the possible price range to help attract status-conscious consumers. The high pricing of a premium product is used to enhance and reinforce a product's luxury image. Examples of companies which partake in premium pricing in the marketplace include Rolex and Bentley. As well as brand, product attributes such as eco-labelling and provenance (e.g. 'certified organic' and 'product of Australia') may add value for consumers and attract premium pricing. A component of such premiums may reflect the increased cost of production. People will buy a premium priced product because:
Price optimization Price optimization starts with a segmentation of customers. A seller then estimates how customers in different segments will respond to different prices offered through different channels. Given this information, determining the prices that best meet corporate goals can be formulated and solved as a constrained optimization process. The form of the optimization is determined by the underlying structure of the pricing problem.
Cost-plus pricing Cost-plus pricing is a pricing strategy in which the selling price is determined by adding a specific dollar amount markup to a product's unit cost. An alternative pricing method is value-based pricing.
Pricing science As the applications of scientific methods to these business problems expanded, the discipline of pricing science became more rigorous and methodological. Initially, statistical and optimization methods were adapted by practitioners and theoreticians from the engineering and operations research disciplines. The discipline was typically referred to as operations research and specialization in revenue or yield management methods was viewed as a specialty in the larger discipline of Operations Research and Management Science. INFORMS, the professional body of the larger discipline, has a section devoted to this specialty, the Revenue Management and Pricing section.
Pricing When decision-makers have determined the broad approach to pricing (i.e., the pricing strategy), they turn their attention to pricing tactics. Tactical pricing decisions are shorter term prices, designed to accomplish specific short-term goals. The tactical approach to pricing may vary from time to time, depending on a range of internal considerations (e.g. such as the need to clear surplus inventory) or external factors (e.g. a response to competitive pricing tactics). Accordingly, a number of different pricing tactics may be employed in the course of a single planning period or across a single year. Typically line managers are given the latitude necessary to vary individual prices providing that they operate within the broad strategic approach. For example, some premium brands never offer discounts because the use of low prices may tarnish the brand image. Instead of discounting, premium brands are more likely to offer customer value through price-bundling or give-aways.
Pricing strategies A retail pricing strategy where retail price is set at double the wholesale price. For example, if a cost of a product for a retailer is £100, then the sale price would be £200. In a competitive industry, it is often not recommended to use Keystone Pricing as a pricing strategy due to its relatively high profit margin and the fact that other variables need to be taken into account.
Penetration pricing Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth. The strategy works on the expectation that customers will switch to the new brand because of the lower price. Penetration pricing is most commonly associated with marketing objectives of enlarging market share and exploiting economies of scale or experience.
Pricing strategies Variable pricing strategy sums up the total cost of the variable characteristics associated in the production of the product. Examples of variable characteristics are: interest rates, location, date, and region of production. The sum total of the following characteristics is then included within the original price of the product during marketing. Variable pricing enables product prices to have a balance "between sales volume and income per unit sold". Variable pricing strategy has the advantage of ensuring the sum total of the cost businesses would face in order to develop a new product. However, variable pricing strategy excludes the cost of fixed pricing. Fixed pricing includes the price of dedication received from manufactures in the production of developing the product and other involvement of factors.
Pricing "Demand-based pricing", also known as dynamic pricing, is a pricing method that uses consumer demand - based on perceived value - as the central element. These include price skimming, price discrimination and yield management, price points, psychological pricing, bundle pricing, penetration pricing, price lining, value-based pricing, geo and premium pricing.
Pricing science Even airlines and other early practitioners began to revisit their original assumption that prices were a "given," a simple input to their optimization technology. The growth of low-cost carriers offering restriction-free pricing, "name your own price" channels, and auctions all stimulated this interest in applying science to the pricing side of the business.
Predatory pricing In many countries there are legal restrictions upon using this pricing strategy, which may be deemed anti-competitive. It may not be technically illegal, but have severe restrictions.